2015 (9) TMI 1007 - AT - Income Tax

Addition on account of unexplained cash deposits in bank account - Held that - AR has placed on record copy of the bank statement of account maintained with State Bank of India and Oriental Bank of Commerce and from he has also worked out the date-wise working of the peak credit of the cash deposited in his bank accounts. We also find that while deciding the appeal of the assessee for AY 2006-07, Ld CIT(A) has in principle partially accepted the addition based on the peak theory as he has directed the AO to accept the amounts which are re-deposited within 15 days of withdrawal. We also find that the decision of the CIT(A) for AY 2006-07 has been accepted by the Department and has not preferred appeal before the Tribunal though the facts of that year are similar to that of other years. Before us, Revenue has not controverted the working of peak credit furnished by the ld. A.R. In such a situation, we are of the view that in the present case the entire cash deposits cannot be added as income but the addition be made only to the extent of peak credit. We therefore restore the issue to the file of AO to restrict the addition on the basis of peak credit. - Decided in favour of assessee for statistical purposes. Addition of jewellery - Held that - We find that Ld CIT(A) after considering the entire facts and the CBDT circular (supra) and by a well reasoned order had granted substantial relief to the assessee. Before us, ld. A.R. has not controverted the findings of ld. CIT(A) nor pointed any fallacy in the findings of ld. CIT(A) and therefore we find no reason to interfere with the order of ld. CIT(A) and thus dismiss the ground of Assessee. - Decided against assessee Unexplained cash found at the time of search - Held that - Cannot accept the contention of the. appellant particularly when the mother of the appellant expired in 2006 and the search took place in the case of the appellant in October, 2008, Further, what was the source of the, cash in the hands of his mother has not been explained by the appellant. Similarly, the appellant has not given the details of withdrawals from his salary. Rather the appellant has tried to improve the cash deposits in his bank account out of the cash withdrawals. Therefore, no hesitation in holding that the appellant has failed to prove the acquisition of cash found from his residence. The addition made on this account is therefore, upheld. - Decided against assessee

Summary

Issues Involved:
1. Addition on account of unexplained cash deposits in bank accounts.
2. Addition on account of unexplained jewelry.
3. Addition on account of unexplained cash found during search.

Detailed Analysis:

1. Addition on account of unexplained cash deposits in bank accounts:
The Assessee filed appeals against the consolidated order of CIT(A)-III, Ahmedabad, for assessment years 2003-04 to 2009-10. The primary issue was the addition of unexplained cash deposits in bank accounts. The Assessee claimed the deposits were sourced from amounts received from deceased parents, sale proceeds of a house, and customary gifts. The AO found the explanation unsatisfactory due to lack of evidence and treated the deposits as unexplained, adding Rs. 6,06,500 to the income. The CIT(A) partially accepted the explanation for Rs. 2,45,000 from the sale proceeds of a flat but upheld the addition for the remaining amount due to insufficient evidence. The Tribunal directed the AO to restrict the addition based on the peak credit theory, recognizing only the peak amounts of deposits after considering withdrawals. This decision was consistent across all assessment years 2003-04 to 2008-09.

2. Addition on account of unexplained jewelry:
For AY 2009-10, the Assessee also contested the addition of Rs. 1,86,981 for unexplained jewelry. During the search, 1113.50 grams of jewelry valued at Rs. 12,73,415 was found. The AO allowed 200 grams as explained per CBDT Instruction No. 1916 but added the remaining 913.50 grams as unexplained. The CIT(A) granted partial relief, accepting 700 grams as explained based on family composition and CBDT instructions, and further accepted an additional 250 grams as belonging to the Assessee's mother. Thus, 950 grams were treated as explained, and the addition was reduced to Rs. 1,86,981. The Tribunal upheld this decision, finding no reason to interfere with the CIT(A)'s well-reasoned order.

3. Addition on account of unexplained cash found during search:
Also for AY 2009-10, the Assessee challenged the addition of Rs. 1,10,000 for unexplained cash found during the search. The AO found Rs. 1,17,000 in cash, of which Rs. 7,000 was explained, and added the remaining Rs. 1,10,000 as unexplained. The CIT(A) upheld the AO's decision, rejecting the Assessee's explanation that the cash was received from the mother and saved from salary, due to lack of evidence and the fact that the mother had expired in 2006. The Tribunal agreed with the CIT(A), noting the Assessee failed to provide adequate proof for the cash source and upheld the addition.

Conclusion:
The Tribunal allowed the appeals for AY 2003-04 to 2008-09 for statistical purposes, directing the AO to reassess based on the peak credit theory. For AY 2009-10, the Tribunal partly allowed the appeal for statistical purposes, upholding the CIT(A)'s decisions on unexplained jewelry and cash found during the search. The orders were pronounced in open court on 28-08-2015.